Owner of Rhino Property Management and Rhino Realty B&B, entrepreneur, investor, consultant, author and speaker.
getty
If one of the fastest growing groups of tenants, Gen-Z enter the market and putting pressure on property managers to start reporting rent payments to the major credit bureaus. Gen-Z pays higher rent than any other age groupand many want credit for those payments.
Since the beginning of last year, financial institutions and credit rating agencies have changed their policies to create more financial inclusion. Financial inclusion is an effort to address economic inequality and promote economic growth by ensuring that everyone, regardless of income level or location, has access to financial services. Greater financial inclusion can improve the long-term quality of life and financial health of young people and is good for the market in general.
In 2022, all major credit bureaus have started including information about rent payments in credit reports and in the calculation of credit scores. Rent payment information will be included when payments are reported, but there is no legal obligation for property managers and landlords to report. Do you have to report your tenant’s rent payment history to the credit bureaus? The short answer: Yes.
Benefits for property managers
I find there are just as many benefits for property managers as there are for tenants. Reporting to credit bureaus can encourage tenants to make timely rent payments because they know their credit scores will be affected by late or missed payments. Fewer late, partial, and missed rent payments save property managers time and money collecting payments.
Rent reporting can also make rent payments more transparent. This makes it easier for landlords to verify that tenants have a history of paying rent on time. This could make it easier for landlords to rent to tenants with limited credit history or poor credit. Offering rent payment reporting can also set you apart from your competition and help you attract and retain higher quality tenants. I notice that both Millennials and Gen-Z, the two largest groups of renters, are actively looking for rental properties where their rent payments are reported.
Benefits for tenants
Until last year, it was mainly tenants who were at the forefront of the movement to report rent payments. For younger renters, rent is the largest recurring monthly expense they make, and timely reporting of payments to the credit bureaus can have a significant impact on credit scores. Tenants in the younger age groups are more likely to have lower or invisible credit.
Growing up at a time when their parents were overburdened and focused on paying off debt, many were focused on limiting the amount of debt they took on. I think this is a responsible financial practice that should not be penalized on credit scores. Good credit can lead to better financial products, such as lower interest rates on loans and credit cards. Rent reporting can help tenants with limited credit histories access better financial products that they might not otherwise have qualified for.
How to start reporting rent payments
Because tenants cannot report their own payments, the responsibility for reporting rests with the property manager. Fortunately, there are many property management systems that can collect rent and report payments directly to credit bureaus.
Please note that rent payment reporting cannot be done from peer-to-peer payment apps such as Zelle and Venmo. The added bonus of dedicated software is that setting up a payment system can reduce late and partial payments because tenants can access all payment information in one place and even set up automatic payments.
If you don’t use or don’t want to use an online payment system with this capability, you can submit rent payment reports using a standalone app. These are relatively inexpensive and I find they usually pay for themselves.
When setting up reporting to credit bureaus, consider whether your software reports both on-time and missed payments or only on-time payments. Reporting all timely and late rent payments gives you leverage that can help you put more pressure on your tenants to keep up with their payments.
If you don’t currently report rent payments to credit bureaus, I think this is a relatively easy step that you should consider. While reporting this information is not mandatory, there are benefits to the property manager, tenant and the wider financial market.
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